Shanghai’s Pudong Applies for a FTZ
The competition between the Shanghai led Yangtze River Delta, the Guangzhou-Shenzhen led Pearl River Delta, and north China’s Beijing-Tianjin-Hebei corridor is heating up. If Pudong gets the FTZ, expect the other two mega-areas to follow suit.
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China has announced plans to set up a pilot free trade zone (FTZ) this year in Shanghai’s Pudong New Area, the booming city’s financial and commercial hub.
Shanghai has applied for a permit to build the FTZ on the basis of its existing comprehensive bonded zones.
If the application is approved, the FTZ would become the first free trade zone in the Chinese mainland, said sources with the government of Pudong New Area, state-run Xinhua news agency reported.
Building the FTZ is one of the Shanghai municipal government’s major tasks in 2013, according to a report on government work delivered by Yang Xiong, acting mayor of Shanghai, at the first session of the 14th municipal People’s Congress.
It will take about three years to build up an FTZ up to international standards, said Wan Zengwei, director of the Pudong Academy of Reform and Development in Shanghai.
FTZ is an area within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of customs authorities.
Analysts said Shanghai has advantageous conditions for setting up an FTZ on the basis of the existing comprehensive bonded zones — Waigaoqiao Free Trade Zone, Yangshan Free Trade Port Area, and Pudong Airport Comprehensive Free Trade Zone.
The trade volume of Shanghai’s comprehensive bonded zones in 2012 totaled over USD 100 billion, the highest in the Chinese mainland.
China sees establishing FTZs as opportunities to boost its trade with surrounding economies and contribute to world trade volume, said Zhou Hanmin, vice chairman of the Shanghai Municipal Committee of the Chinese People’s Political Consultative Conference.
The FTZ will help Shanghai to cut the costs of trade and improve the trade efficiency, Wan said.
Besides, the FTZ will demand some supporting financial services such as cross-border financing businesses and international trade settlement, which will be conducive to deepening China’s financial reform, the official added.
Analysts believe that the FTZ to be built in Shanghai will serve as an important engine for China’s cause of deepening reform and opening up in the next five to 10 years, the Xinhua report said.
– Economic Times (of India)
MacLean’s: China’s Green Revolution
There have been several posts on China’s growing investment in renewables and cleantech on this blog but here’s an in-depth MacLean’s article. Also featured is an interview with a MacLean’s editor on China’s leadership in clean energy and what it means for the West and Canadian cleantech companies. China is not only the world’s largest market for environmentally-friendly technologies that will expand massively as China cleans up and urbanizes but in the not so distant future, she will emerge as a major exporter of home grown cleantech.
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China’s ongoing struggles with pollution have been a blight on the country’s international reputation. The world’s image of China is that of an industrial behemoth fuelled by the dirtiest of energies, coal. On the surface, the reputation is well deserved. No country pumps out as much CO2 as China (not even the U.S. comes close). But behind the smog, China’s environmental woes have become an unexpected boon to the global renewable energy industry. Last week’s air quality emergency sent Chinese green energy stocks soaring on the hope that the political fallout will prompt the Communist party to offer up more public money for the country’s burgeoning environmental protection sector.
Investors are counting on it. Even as it remains the scourge of environmentalists for being the largest emitter on the planet, China is also emerging as the world’s biggest spender on green energy.
Globally, green energy investment fell 11 per cent last year, according to a recent Bloomberg New Energy Finance report. Indebted European countries slashed subsidies, India cut its spending by more than 40 per cent and the U.S. witnessed a string of solar power manufacturer bankruptcies. China’s investment in renewable energy, meanwhile, was a bright spot. It rose 20 per cent to nearly $68 billion, or a full quarter of the $269 billion global total.
From having virtually no green energy infrastructure as recently as 2008, China has built 133 gigawatts of renewable energy—mainly wind turbines—enough to power as many as 53 million homes, or every household in Canada four times over. The International Energy Agency predicted that China would overtake Europe as the world’s top renewable energy growth market. It’s a market expected to be worth more than $470 billion by 2015, according to state-owned China Merchants Securities, or almost double what it was in 2009 and equal to about eight per cent of the country’s GDP.
That investment has caught the eye of clean-tech companies in Europe and North America, who are flocking to China in hopes of selling their technologies after seeing demand stagnate or collapse in their home markets. “All the key players are going to China these days,” says Changhua Wu, Greater China director of the Climate Group, a London-based agency that promotes green energy investment. “Everyone is trying to figure out what the potential for opportunity is, partly because everyone recognizes that China could potentially be the largest market for clean tech in the world.”
As China takes the lead, everyone will benefit from the technology that is developed and exported. China is saving itself, but might also be saving the world in the process.
While the Middle Kingdom’s smog problems have earned plenty of headlines, it has also been quietly attracting a host of very unlikely supporters, including praise from the Pew Charitable Trust and the World Wildlife Foundation, which gave its “climate solver” award this year to several Chinese companies that manufacture technology to capture and recycle wasted heat, water and chemical emissions to power everything from factories to refrigerators. Greenpeace predicted the country would be on track to install 400 gigawatts of wind energy by 2030 and could become the largest solar market in the world.
The argument that China is the world’s environmental bad guy “is increasingly difficult, if not impossible, to make given China’s recent policies,” wrote the authors of an October report for the Climate Institute, an Australian think tank. The country has closed more coal-fired power plants since 2006 than the entire capacity of Australia’s electrical grid, and exported more than $35-billion worth of renewable energy technology—equal to the total value of shoes exported from China that year. This year, China is rolling out pilot projects that could eventually lead to the world’s largest carbon trading system.
“The broad scheme of things is that China believes it wants to become a resource-conserving, environmentally friendly society and that’s the way they describe it, in those exact words,” says Arthur Hanson, one of Canada’s leading experts on sustainable development. The former founding director of Dalhousie University’s School for Resource and Environmental Studies, Hanson is in Beijing this week in his role as international chief adviser to the China Council for International Co-operation on Environment and Development.
For the entire article and the video, see: http://www2.macleans.ca/2013/01/27/business/
Freshfields: China to Continue Leading in M & As
China maintained its magnetism for international companies last year, attracting almost $35 billion of new inward investment, according to analysis by international law firm Freshfields Bruckhaus Deringer.
Despite political uncertainties caused by the leadership handover, a spate of accounting scandals and anxieties about economic growth, investment into China rose 3% compared to 2011, reaffirming the country’s position as “the prime investment hotspot among the world’s key growth markets” during 2012.
It’s the third time during the past five years that China has been the most sought after investment destination.
“2012 turned out to be a more encouraging year for deal making, especially in the high-growth markets in Asia where we saw several significant M&A transactions announced during the year,” said Freshfields’ Asia managing partner Robert Ashworth.
“Activity levels in China, in particular, rebounded well, with another solid increase to $35 billion in aggregate cross-border deal activity recorded,” he added.
After China came Mexico ($25.6 billion) — almost entirely due to a $20 billion acquisition by Anheuser-Busch InBev — then Russia ($18.6 billion), Brazil ($18.2 billion) and Indonesia ($13.7 billion).
By deal volume, China also took the top spot with 598 transactions, followed by Russia in second place with 384 deals.
The value of global M&A investments targeting the world’s key growth markets surged by 5% during 2012 (to $162.4 billion) compared to the previous 12 months. It followed a decline of almost 25% the previous year (2011 compared to 2010).
Activity was dominated by acquisitions in the banking, food and beverage, metals and mining, and insurance industries, accounting for almost 45% of total investments.
The US was the most acquisitive nation in the growth markets. In fact, it committed the most investment in these markets since 2007, an increase of almost 70% on the previous year to more than $13 billion.
It was followed by Belgium (because of the Anheuser-Busch InBev deal), Hong Kong and Singapore. By volume, Hong Kong ranked in second place with 324 transactions.
– FinanceAsia
China’s Jumbo Freight Carrier Takes Flight
China Ties to Boost Vancouver: Real Estate Panel
Metro Vancouver isn’t in a real estate bubble and markets will remain stable in 2013 – as long as interest rates remain low, immigration targets are met and Europe’s economy doesn’t melt down, a panel of real estate developers told more than 1,100 real estate professionals, business leaders and B.C. politicians on Thursday.
Colin Bosa, CEO of Bosa Properties, Tony Astles, executive vice-president of Bentall Kennedy, and Eric Carlson, president and CEO of Anthem Properties provided the Urban Development Institute’s annual market forecast while Diana McMeekin, president of Artemis Marketing, moderated.
Bosa said that as long as people continue to move to British Columbia, the real estate market will remain stable.
He compared conditions in 2009 to those today and found that demand is similar, although immigration numbers were down in 2012 and two federal immigration programs – the investor program and the skilled worker program – are under review and could be subject to change.
In terms of supply, he said, more units were built in 2012 than 2009, but not many more than the 15-year average.
“The good news for all the salespeople in the room is, you’re going to sell lots of real estate this year, but the bad news is you’re going to have to work at it,” Bosa said, adding that projects near transit service will continue to sell well.
Southeast False Creek and Coquitlam Centre are two areas with a lot of unsold inventory, Bosa said. He said realtors in those areas might have to “sharpen their pencils” and that prices might decline.
However, he said Metro Vancouver condominium developers showed in 2009 that developers can “turn off the tap” quickly when the market slows.
Bosa said he believes people – and their money – from China will continue to flow into B.C. because they want to invest outside China and they want their children to grow up in North America.
“They like it in British Columbia because it’s safe and they’re accepted here,” Bosa said.
“There is a good quality of life with universal health care and good schools.”
Two things that could stop the flow of people from China in to British Columbia would be a recession or a change to Canadian immigration policy, Bosa said.
“If you buy good real estate at fair prices, you can’t go wrong,” Bosa said. “It’s not that hard.”
Carlson said B.C. and Canada were protected between 2009 and 2011 while the rest of the world was reeling from the economic crisis. Canada did not really need the extremely low interest rates as much as the rest of the world, and the low rates coupled with immigration, stimulated the housing market.
“We felt a bit smug if we were provincial in our outlook. That ended in 2012. … We started to feel the malaise for the first time,” Carlson said.
But he forecast that 2013 would be a stronger year because of B.C.’s ties to China and the U.S., which are both seeing economic recovery.
– Vancouver Sun
Advice for Canadians from CIBC’s Prentice
Further to a previous post on the subject, Canadians should heed Mr Prentice’s words.
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The Harper government’s new foreign investment rules for state-owned enterprises leave plenty of room for such companies to invest in Canada’s oil and gas sector, but investors need to consider not only the higher regulatory hurdles but an uneasy political climate, Canadian Imperial Bank of Commerce vice-chairman Jim Prentice says.
In a speech to an investors conference in Whistler, B.C., the former Conservative industry In minister also warned that Canadians need to be wary lest their uneasiness with foreign, government-controlled companies results in Canada failing to attract needed capital for jobs and growth.
In a lengthy review of the government’s new guidelines which were released last month, Mr. Prentice said they strike a reasonable balance between ensuring that important parts of the economy do not fall under the control of foreign governments, and they attract much-needed capital.
“The new rules, at the most basic level, are a positive step for our country because they recognize and declare that Canada must and will remain open for business – and that means open to foreign investment,” Mr. Prentice said in the speech delivered late Thursday.
In December, Prime Minister Stephen Harper unveiled new rules that prohibit takeovers by foreign SOEs in the oil sands, and impose greater screening on other acquisitions by such companies to ensure they operate in a market-friendly manner and will not lessen productivity in the Canadian economy. As he announced the guidelines, Mr. Harper also approved CNOOC Ltd.’s bid for Nexen Inc. and the acquisition by Malaysia-based Petronas of Progress Energy Corp.
In an interview after his speech, the former minister said he has travelled to China since the new policy was released and has found that business leaders there are confident they can do business here, including making investments in the oil sands so long as they do not seek majority positions in that sector.
“There is a recognition that while the oil sands have been carved out in terms of changes of control in terms of oil sands resources by state-owned enterprises, there will still be amply M&A activity, but subject to increased regulatory uncertainty,” he said. But even with the new uncertainty, Canada’s is perceived as a more welcoming environment that most other developed countries.
He told investors that SOEs will likely have to shift their focus from acquiring mid-cap companies to partnering with larger firms in joint ventures. An example of that kind of deal was unveiled just days after Prime Minister Stephen Harper announced the new regime, with EnCana Corp. signed a $2.2-billion joint deal with PetroChina to jointly develop unconventional, liquids-rich gas fields.
The review of significant acquisitions by SOEs “have been and will remain primarily a political question,” he said, adding Ottawa has plenty of flexibility to interpret the new rules in the most politically advantageous way. “With the stakes this high, there is always the possibility – perhaps even the likelihood – that politics are going to trump policy.”
And he noted there is “enormous public sensitivity” to the acquisitions of significant resources assets by non-western SOEs.
However the former politician had a warning for Canadians: “As highly as we regard ourselves, our resources and our businesses, the hard truth is that people will move on and look elsewhere if ever we close ourselves off to the world, And with them will go potential jobs and opportunities.”
– Globe and Mail
China’s Energy Industrial Revolution
A couple graphs in a lengthy Asia Times article caught my eye. China is reducing its energy intensity as it rapidly modernizes, according to the authors.
Figure 4 – China’s energy intensity, 1980-2008, and projected to 2050.
Source of primary data: historical energy intensity calculations based on National Bureau of Statistics of China data; energy intensity data 2010-2050 based on projections from the Energy Research Institute of China.
China, however, has been following a quite different pathway in terms of its energy intensity. In Figure 4 we plot its energy intensity since 1980, and project its energy intensity forward based on projections of researchers at China’s official Energy Research Institute. [7]
Since the growth of GDP is expected to be substantially higher than that of energy consumption in the next decades, the estimated energy intensity can be anticipated to decline quickly after 2010.
We interpret this chart to mean that China was able to accomplish the quite unprecedented feat of quadrupling GDP from 1980 to 2000 while “only” doubling energy consumption – thus accounting for the continuing decline in energy intensity (admittedly from a very inefficient starting point).
Figure 5: China: Projected carbon emissions from thermal power generation, 2000-2040
Source: Authors’ calculation.
This fifth chart tells a remarkable story. We can read off the level of CO2 emissions for 2000 (around 0.5 Gt CO2) rising to more than 3 Gt CO2 by 2010 and an anticipated level of 5.3 Gt CO2 by 2020 from conventional thermal power stations.
By integrating under the curve, we estimate that total CO2 emissions due to China’s fossil-fuel-based electric power generation over the next three decades between 2011 and 2040, would be about 140 billion tonnes.
Yes, China’s carbon emissions from electric power generation will continue to rise – but we anticipate that they will plateau in the 2020s and then start to decline – steeply, as thermal power generation declines.
For the entire article, see: http://atimes.com/atimes/China/OA26Ad01.html
CFO: Lenovo May Eye RIM for Takeover
A senior Lenovo executive said on Thursday that the Chinese computer maker may consider Research in Motion as a takeover target, sending the Blackberry maker’s shares up 2 percent just a week before it launches a make-or-break line of redesigned smartphones.
But Lenovo, which vaulted into the personal computer market with its 2005 purchase of IBM’s PC division, would face formidable hurdles if it tried to buy a company that Canadian Prime Minister Stephen Harper once described as a national “crown jewel.” The Chinese company would also encounter tough regulatory scrutiny in Washington, cybersecurity experts say.
Lenovo, on track to become the world’s largest PC maker, has held talks with RIM and its bankers about various combinations or strategic ventures, its chief financial officer, Wong Wai Ming, said on Thursday.
“We are looking at all opportunities – RIM and many others,” Wong told Bloomberg in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “We’ll have no hesitation if the right opportunity comes along.”
A spokesman for Lenovo said Wong was asked about RIM by the Bloomberg journalist and that Wong was speaking broadly about Lenovo’s M&A strategy.
– Reuters
Bank of England Wants RMB Swap With China
This is a significant development which bolsters the RMB’s internationalization.
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The Bank of England is prepared in principle to become the first G7 central bank to enter into a foreign exchange swap agreement with China, opening the door to another substantial step in moves to liberalise the yuan currency.
The bank’s Executive Director for Banking Services, Chris Salmon, told a meeting of senior bankers in London that the move was aimed at underpinning a developing offshore market in yuan trade out of London that Britain is keen to encourage.
It would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment.
British officials have previously shied away from such a deal because the renminbi (yuan) is not freely exchangeable. But there have been signs that China is moving to open up trading of its currency and Salmon said the bank was more interested in helping yuan business to flourish.
“The Bank would welcome the development of the offshore RMB market just as it would any other legitimate market innovation, and we would not want to inhibit that outcome inadvertently through gaps in our operational framework,” he told the London Money Market Association’s Executive Committee in the text of his speech provided by the bank.
“To remove any residual uncertainty about our attitude: the Bank is ready in principle to agree a swap line with the PBOC (People’s Bank of China), assuming a mutually agreeable format can be identified.”
European and U.S. officials have been pressing China for years to do more to open up the yuan to market forces, saying its artificial weakness was one of the key imbalances of the global economy.
Beijing is slowly delivering, although it still keeps a tight rein on gains for the currency for fear it will weaken an economy that has been the biggest engine of global growth for a decade.
“This is part of the internationalisation of the RMB, this is China moving forward to internationalise its currency,” said David Bloom, head of FX strategy at HSBC.
“They are setting up these lines around the world, it is the beginning of the opening up of the flower of the RMB.”
– Reuters
US Foundation to Send 100,000 Students to China
US Secretary of State Hillary Rodham Clinton, as part of her ongoing commitment to the US-China relationship, on Thursday announced the creation of the 100,000 Strong Foundation to enhance and expand opportunities for US students to learn Mandarin and study in China.
The 100,000 Strong Foundation is a new non-profit effort, housed in American University’s School of International Service in Washington, DC. Its mission is to strengthen the US-China strategic relationship through study abroad.
The Foundation was borne out of a US State Department Initiative of a similar name – the 100,000 Strong Initiative – that was first announced by President Barack Obama in 2009. Secretary Clinton launched the initiative in 2010. The effort has been backed by the Chinese government, which is offering 20,000 scholarships for Americans to study in China. The 100,000 Strong Foundation understands that the future of the US-China strategic relationship rests with our young people.
– newswise.com